Montesa was formed in 1944 by Pedro Permanyer and Francisco Xavier "Paco" Bultó. Their first Montesa prototype was based upon the French Motobécane models of that time. Permanyer began to produce his own gas engines, which allowed for a new area in motorcycles to be explored and expanded into. Permanyer and Bultó teamed up in Barcelona and created a light-weight motorcycle.

The most successful Montesa street bike of the '50s was the Brio 80, of which more than 12,000 were produced. The success of the Brio and the other models, led to the opening of a new and larger factory in Espluges de Llobregat. The Brio 80 and Brio 90 models contained many new advances, such as moving the carburetor behind the cylinder, and a handbrake. However, a slump in the Spanish economy had forced Permanyer to cut back on the company's racing activities. Permanyer wanted to pull out of road racing, but Bultó insisted that they stay in. In May 1958, chief designer Bultó left, taking with him several of Montesa's vital personnel. Permanyer had not only lost the brilliant designer Bultó, but also his 30% share of the company.

By 1981, another round of economic unrest in Spain began to hinder motorcycle manufacturers. Strikes and a shrinking market left Montesa as the only major motorcycle concern in the country; however they were in need for a major influx of capital in order to continue to survive. A loan from the government and shares sold to Honda (to establish a European manufacturing base for their commuter bikes) helped production continue. Indeed, one of the government's stipulations was that Honda would guarantee that production would not stop. Honda was prepared to stockpile trials bikes and to sell them off at a loss in an effort to reach Europe's more profitable market and to bypass restrictive import tariffs.In July 1985, a major reorganization took place and a large amount of money from Honda was received. By then, only two trials models were offered and the workforce had dwindled to a mere 152 employees. A year later, there were further financial moves between Honda, Spain's government and the Permanyer family, leading to Honda buying the majority of the family's remaining shares. Honda now had an 85% holding and spent another $5 million on modifying and updating the factory.

Montesa was still active in World Trials competition throughout the 1980s and into the 1990s. Even though reduced to only offering one model, the Cota, such riders like former World Champion Eddy Lejeune and Andrew Codina rode the bike to good results in the mid-'80s. In 1992-93, the liquid-cooled Cota 311 was produced; this was to be the last "real" Montesa. In 1994, a new model, the 314R, was introduced. This model featured an HRC Honda powerplant with many other components from Honda. Montesa-mounted Marc Colomer won the World title in 1996 and the 315R followed in early '97. The 315R had a run of 7 years, taking Dougie Lampkin to many world championships, and was replaced by the technically advanced four-stroke Cota 4RT in 2005.